When it comes to lending huge sums of money to individuals or organizations, banks and other kinds of lending institutions are usually reluctant. They usually tread cautiously when determining the amount allowable to be disbursed depending on certain attribute benchmarks that aimed at reducing the inherent risks.
Small businesses that have less or no proven performance track record may find it hard to get the necessary money for their businesses. Many lenders demand proof that a certain business has been operating successfully for some years considering the high rate of new small businesses that keep failing after their first or second year of operation.
Some lenders will also require an additional extensive documentation from the businesses so that the loan can get approved. However, the larger businesses may be relieved with less stringent measures as their consistent record of positive cash flows will be enough to get their loans approved.
When you have no adequate requirements, you can boost your chances of loan approval through co-signing your commercial loan.
Boosting the chances of receiving a commercial loan
1. Have a business plan to show how the loan will be utilized after being secured
In a presentable format, you ought to have a budget that displays how the funds will be utilized to boost the business operations. It is important to display how the funds will be allocated to the specific budget items.
Write down the experience that you have gained from the company or from operating the business together with a brief history of the business. Attach the history and the experience aspect in the presentation you will submit to the specific lending institution so that to boost the chances of attaining business credit.
Even if you might be eligible for other types of subsidized loans, getting a business loan can sometimes be a difficult exercise.
2. Contact the lenders to set an appointment with the commercial loan officer
Unlike other kinds of loans such as personal loans or mortgages, commercial loans are usually not that standardized. In this scenario, lending institutions look at a case-by-case basis to approve the loan and decide on the interest rate.
3. Meet the lender and make an exciting presentation
When you meet the lender, make sure you specify the number of funds you wish to secure and properly display how you intend to utilize it efficiently. There are some crucial components that you need to include in your presentation to increase the chances of gaining approval of the loan. Things like accounts receivable, equipment, property or other valuable assets should be included as they reduce the interest rate and increase the chances of loan approval.
Some business people fear including these items since it increases the business risk but the good thing is that it increases the stakes of approval. Co-signing can also be done to distribute some risks so as the loan looks more attractive.
4. After the approval process makes sure, you keenly follow the plan that you had presented.
If you don’t follow the plan, you may fall into difficulties with the lending institutions.
Getting the loan approval
Identifying which kind of lender suit your business needs is not an easy procedure as each lender will try to persuade you that they are the market leader in the commercial loans area. Since there are unique application and security features involved in securing the loan extremely complicates the methods that banks utilize to assess the commercial loans to be disbursed.
1. Selecting a viable lender
Normally within the commercial funding market, only one or two banks tend to dominate the section. Therefore as an investor, you will have to be keen when choosing where to borrow the loan. Usually, the type of loan you intend to secure will largely determine the kind of lender you ought to get.
The type of investor client will also largely determine the different kinds of banks available. For instance the investors can be
Highly-geared commercial property investors.
Low-risk commercial property investors.
Therefore, it is wise to consider what type of investor you fall in when looking at the above list of investor type. In that way, you will choose a lender that has experience dealing with your kind of commercial real estate and as such raise the chances of loan approval.
2. Exhibiting a strong application
Looking for a commercial loan is all about creating a good impression that can build confidence. As such, present the application in a way that is more conceivable to the banks. When presenting, it is crucial to highlight the necessary strengths that appear in the application. Therefore, it will not be adequate just to fill the provided forms and give the necessary documents.
There are usually various forms and templates that banks prescribe for borrowers to fill. Banks will differ on the kind of information they want to see as some will need a lot of information while others will require the bare minimum.
Along with that, it is wise to seek advice from commercial real estate brokers as most of them have worked in the bank’s credit department as it approves and declines some applications.
3. Mitigate possible concerns
There are instances where the bank may fail to approve the application due to certain concerns. At times, the bank could fail to approve the application right away. When you see such a scenario, negotiate and try to resolve the underlying problem.
As a borrower you can do one of the following things;
Change the situation so that it complies with the lending guidelines
Negotiate ways to match the risks.
Provide more information to counter the concerns.
For instance, a lender may have noticed that you had disputes with a supplier that contributed to a bad credit history. In that regard, a letter from your solicitor will explain what happened. Also, you could also provide a bank statement showing you were capable of settling the debt at that time given a chance.